Stevensdrake Ltd (Trading as stevensdrake solicitors) v Stephen Hunt and Another
| Jurisdiction | England & Wales |
| Judge | His Honour Judge Simon Barker |
| Judgment Date | 26 February 2016 |
| Neutral Citation | [2016] EWHC 342 (Ch) |
| Docket Number | Case No: HC-2014002213 |
| Court | Chancery Division |
| Date | 26 February 2016 |
[2016] EWHC 342 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Rolls Building
Fetter Lane
London
EC4A 1NL
His Honour Judge Simon Barker QC
sitting as a Judge of the High Court
Case No: HC-2014002213
Representation:
Andrew Sutcliffe QC instructed by stevensdrake solicitors
Hugh Sims QC and Simon Passfield instructed by Devonshires Solicitors LLP
Hearing Dates 7 – 10 December 2015
His Honour Judge Simon Barker QC:
Introduction
Stevensdrake Limited, which carries on business as stevensdrake solicitors, ("SL") claims against Stephen Hunt ("SH") outstanding fees due under a Conditional Fee Agreement ("the CFA") between SL and SH dated 10.4.08 relating to work to be done in furtherance of an application under s.212 1 of the Insolvency Act 1986 (respectively "s.212" and " IA 1986") against Theodolous Papanicola ("TP") and Alan Simon ("AS"), the former administrators of Sunbow Ltd ("Sunbow"), of which SH had become the liquidator. The partner acting at all material times on behalf of SL was Gavin Pickering ("GP").
It is common ground that the proceedings taken against TP and AS were compromised as follows: (1) in October 2009 AS consented to a Tomlin order to settle the claim against him in the sum of £125,000, which AS has paid; and, (2) in July 2011 TP consented to a Tomlin order to settle the claim against him in the sum of £1.9million, which TP has not paid. It is also common ground that each compromise satisfied the definition of success under the CFA.
The CFA provided for an uplift of 100% on SL's base costs as a success fee. The basic structure of SL's bill, which was issued to SH on 28.2.14 for payment after 28 days and forms the basis of SL's claim in this action, is as follows :
|
| £ |
| SL's base costs (inc VAT) | 397,686.24 |
| SL's success fee (inc VAT) | 397,684.24 |
|
| 795,372.48 |
| Disbursements (fees, travel etc, inc VAT as applicable) | 2,859.04 |
| Disbursements (counsel, inc VAT) | 140,607.19 |
| Total | 938,838.71 |
At the core of SH's denial of liability for any part of SL's bill (other than disbursements excluding counsel) are contentions that (1) there is a recognised and established practice in the field of insolvency litigation against estates where there are few or no assets of value that (a) to secure instructions solicitors and counsel offer to provide their legal services on terms that they will become entitled to payment only out of recoveries made in the litigation, (b) to the extent that there are insufficient recoveries, the entitlement to payment would abate pro rata, (c) nevertheless, and so as not to breach the indemnity principle, the strict legal rights created by the conditional fee arrangements stipulate that success in the litigation triggers a liability to pay the fees, and (d) it is known and understood that the parties will not enforce their strict legal rights but operate Recoveries Only Liability ("the Practice") 2; and, (2) the Practice was (a) an established method of working between SH and GP and (b) expressly adopted in relation to the Sunbow liquidation and the s.212 claims against TP and AS.
In relation to counsel's fees, SL has obtained summary judgment against SH for sums due to counsel. On 15.10.14 Chief Master Marsh gave summary judgment for SL in respect of counsel's 3 fees in a sum to be assessed and ordered a payment on account in the sum of £75,000. The Chief Master also struck out paragraphs 4(j) of SH's Defence (reliance on distribution of monies received from AS pro-rata as evidencing agreement to recoveries basis or as estoppel by convention) and paragraphs 14 (breach of fiduciary duty on the part of SL) and 1(undue influence on the part of SL) of the Counterclaim. On 20.5.15. HHJ Purle QC, sitting as a Judge of the High Court, granted SH permission to appeal and then dismissed the appeal.
HHJ Purle QC 4 referred to the different descriptions of SH as defendant as being of no consequence :
" … Describing [SH] as "liquidator of Sunbow limited" does not turn him into a different person, or affect his liability, and it certainly would not be right to equate him with [Sunbow] just because he is liquidator. Sunbow is not a party".
Since the appeal before HHJ Purle QC, SH's Defence and Counterclaim has been re-cast by amendment and re-amendment with permission of the Court. SH (1) maintains that he has no personal liability under the CFA because he entered into that contract as liquidator of Sunbow not in his personal capacity; and (2) seeks, if and to the extent that he is otherwise liable under the CFA, (a) a set off, (b) to have the CFA set aside in equity, or (c) to raise estoppel by convention as a barrier to the claim. The platform for SH's answer to the claim is the Practice and its adoption in previous dealings between the parties and in relation to the Sunbow liquidation.
SH further (1) raises undue influence, on the basis that there is an irrebuttable presumption that SL had influence over SH as liquidator and that personal liability under the CFA would be manifestly disadvantageous to SH when compared to his legitimate expectation that the Practice would apply, and seeks an order that the CFA be set aside; (2) contends that SL owed a duty pursuant to the CFA or of skill and care to SH which it broke by failing to advise that the CFA imposed personal liability on SH which SL intended to enforce contrary to the Practice; (3) contends that by reason of its opportunity to gain substantial financial advantage at the expense of SH, SL owed fiduciary duties to SH which it broke by failing to disclose to SH the material difference in his liability before and after entering into the CFA; (4) contends that SL is in breach of express terms of the CFA that SL would (a) always act in SH's best interests (subject to their duty to the Court), (b) explain to SH the risks and benefits of taking legal action, (c) give SH their best advice about whether to accept any offer of settlement, and (d) give SL the best information possible about the likely costs of his
claim under s.212; and, (5) contends that SL is estopped by convention from asserting that the Practice does not apply to the operation of the CFA because (a) SL and SH shared an assumption, belief or understanding that the CFA would operate in accordance with the Practice and (b) it would be unconscionable for SL to be entitled to obtain payment from SH having regard to the facts that both as a matter of prior dealing and specifically in relation to the Sunbow liquidation and litigation against AS and TP the Practice was to, and did, apply.In brief opening submissions for SH, Mr Sims QC explained the response to the claim in terms of primary, secondary and, if needed, tertiary cases. The primary case is that, as a matter of collateral contract or of construction of the contractual documentation between the parties or as a matter of estoppel by reference to the dealings between the parties, SL agreed to wait for sufficient recoveries before invoicing SH. The secondary case is that SL, by GP, was in flagrant breach of duties under the Solicitors' Code of Conduct 2007 to advise SH as to the terms and conditions of the contractual arrangements. The tertiary case is that, when advising in relation to offers made by TP and AS, SL (by GP) was under a duty to disclose its intention to enforce the growing liability in legal fees.
In the light of HHJ Purle QC's judgment in relation to counsel's fees, the argument has focussed on the claim by SL for its own base costs and success fee. SL has also made clear that, if successful in this action, it will not object to a detailed assessment of its bill but will seek an appropriate payment on account.
Background / the facts
SH is an experienced licensed insolvency practitioner; he joined Griffins, a London firm of insolvency practitioners, in 1991 as a trainee case administrator, became a partner in 2000, and has been a licensed insolvency practitioner since 2003.
GP is an experienced solicitor who has specialised in insolvency for many years.
SH and GP first worked together on an insolvency matter in 1993 and they have worked together on numerous (more than 40 on Mr Sims QC's submissions) insolvency matters since then.
It is common ground that in respect of a number of those matters the arrangement was that the solicitors agreed to be paid on a recoveries basis, including in instances where there was a CFA in place in respect of the solicitors' fees. However, precisely how recoveries were to be or were apportioned between SH and GP's past and present firms is not clear from the evidence of past and other dealings between SH and GP.
SH was appointed as liquidator of Sunbow in July 2005. Creditors were keen that the conduct of the former administrators, TP and AS, should be investigated, and any losses caused by wrongdoing on their part recovered.
Shortly thereafter SH contacted GP and engaged SL to act in relation to the Sunbow liquidation. To confirm the instruction SL sent SH a retainer letter dated 1.9.05 and enclosed SL's standard terms of business. The subject matter of the instruction was the liquidation of Sunbow. Although the standard terms provided for the rendering of monthly accounts and payment within 28 days, the letter modified the terms by providing an assurance that, except in relation to out-of-pocket expenses, the terms of business were amended by the letter so that SL...
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